The Newsletter | No.62 | Winter 2012 The Focus: Chinese and EU Energy Security | 31

Japan and : an evaluation of relationship-building in the context of energy security supply

Japan’s dealings with Iran have been those of a close and long-term relationship. Relations with Iran date back to 1953 when the first direct oil deal with the government of Iran, through Idemitsu Kosan Co. Ltd, was agreed upon. Additional significant oil experiences in Iran have taken place since 1968, when the Japanese government dispatched a Mitsui Company mission to investigate the feasibility of joint petro-chemical production in Iran, which led to the establishment of the Iran-Japan Company (IJPC) in 1973. Despite the fact that the IJPC joint venture terminated prematurely and under bad terms, this did not affect Japan’s overall energy cooperation with Iran.

Raquel Shaoul

Likewise, negative factors impacting Iran’s energy Above: Distant the countries’ relationship-building nature, and (2) to analyze In previous years, when Japan was asked either by the US capabilities and oil transactions during the 1980s and , Iran. the circumstances under which the interdependency pattern or by some of the European countries to impose sanctions the 1990s, such as the Iran-Iraq war (1980-88) and the US Photo reproduced may erode. The implications for Japan’s future energy security or decline relations with Iran, the different Japanese govern- imposition of economic sanctions, did not cause a rupture courtesy Creative supply are assessed in this regard. ments usually refused the demands, until the moment they in Japan-Iran diplomatic and energy relations. Instead, Commons/Flickr. felt that the ‘critical dialogue’ was leading to either the Japan and Iran have succeeded in maintaining close energy Despite the differences found between Phase One and isolation of Japan in the international arena, or to a serious relations under the so-called ‘Critical Dialogue’ relationship. Phase Two, they depict a common picture: Iran’s dependence potential risk to its interests vis-à-vis the US (exemplified In February 2004, Indonesia , Ltd. (Inpex), a Japanese on Japan seems to be greater than Japan’s dependence on by Japan’s response to the 1979 and 1995 sanctions). upstream company, with the government of Japan as its largest Iran, both in economic and political terms. However, Japan shareholder, and the National Iranian Oil Co. (NIOC) on behalf has perceived itself as much more vulnerable vis-à-vis Iran By contrast, since 2005, the various Japanese governments of the government of Iran, entered into a new phase of energy in terms of potential disruption of relations. Phase Three, have shown no hesitation to back UN and US sanctions cooperation by signing a deal to jointly develop the southern by contrast, revealed Japan’s growing energy vulnerability against Iran. Japan has voted in favour of all UNSC sanctions part of the Azadegan oil field. Relations, however, have began due to several severe energy setbacks faced since the early against Iran for noncompliance with IAEA regulations. to deteriorate since the promising Azadegan oil agreement 2000s. Nevertheless, a more confident Japanese political Moreover, in 2007, Japan took additional penal measures (projected to yield 260,000 barrels of crude oil per day position in relation to Iran has been detected. against Iran, including the freeze of assets belonging to by 2013) came to an end in September 2006. The disruption several Iranian citizens and institutions considered to have of the Azadegan oil deal illustrates the external sources of The evaluation of the Japan-Iran relations throughout the some link to the country’s nuclear program. On 3 September anxiety and pressures the Iran-Japan relationship has had prism of the Phase Analysis has revealed different trends 2010, after the US, the EU, Canada, and Australia, Japan also to contend with since the oil deal was made. of continuity and change over the years. A major trend imposed new sanctions on Iran. Unilateral sanctions beyond of continuity relates to the Iranian dependence on Japan. the UN framework that include a ban on transactions with This essay sheds light on how Japan-Iran relations developed In accordance to the specific circumstances over time, the several Iranian banks, sanctions against investment in energy between the late 1970s and the early 2000s, as a result of dependency varied but still remained significant over the years. and freezing the assets of 88 institutions and 24 individuals economical, political and strategic factors. The analysis of the The new sanctions For instance, during the 1980s, Japan’s importance to Iran was suspected of being linked to Iran’s nuclear program develop- Japan-Iran relations in the course of different periods of time illustrate Japan’s mainly founded on relative narrow economic terms. Japan ment, including the Islamic Revolutionary Guard and Islamic and constant changing circumstances reveals a multifaceted acceptance of became a provider of wealth in terms of oil purchasing during Republic of Iran Shipping Lines. The new sanctions illustrate relationship characterized by unilateral Iranian dependency the US view, which the ‘Arab Oil Shock’. In the 1990s, however, Iran’s dependence Japan’s acceptance of the US view, which accuses Iran for on Japan, despite Japan’s huge energy dictated imports. accuses Iran for on Japan expanded. Japan became not only a significant illicit development of nuclear weapons, even though IAEA Nevertheless, the uniqueness of Japan’s relations with Iran illicit development political bridge to the international arena in times of isolation, has not endorsed this view. lies in the fact that despite its improved leverage vis-à-vis Iran, of nuclear weapons, but also provided capital in terms of overseas development its sense of vulnerability to a large extent has had an impact on even though IAEA assistance, in addition to oil purchases – particularly important We conclude therefore that Japan’s assertive policy has its attitude and policies towards Iran. This has caused Japan to has not endorsed for a country immersed in economic difficulties. led to the observed decreasing share of Iranian oil imports sustain relations with Iran, even though it has put at risk some this view. to the country. Amid the development of political circum- of the most important interests with its foremost ally, the US. Nevertheless, we can see that despite Japan’s leverage on stances, Japanese downstream and upstream companies Iran, the former’s sense of vulnerability, consequent to its are not willing to risk their security of energy supply. The Japan defines its relationship with Iran as ‘interdependent’. almost total dependency on imported energy sources and fact that energy demand in Japan is not expected to increase Hence, it is essential to define interdependence. One view its subordinate relations with the US, caused it to maintain dramatically in the coming future, due to an aging population of interdependence stresses the cost and benefits that would relations with Iran in accordance to the so called ‘Critical and changing patterns of industrial production, has led Japan be lost if a relationship were disrupted. Interdependence Dialogue’ policy. However, the nature of the relations to introduce changes into its energy supply security strategy. should be understood as mutual vulnerability.1 This is not to began to gradually change in the early 2000s. The Azadegan This has resulted in a large impact on Japan’s relations say that the interdependent relation pattern of Japan and Iran oil agreement rupture of 2006 exemplifies one of the towards ‘traditional’ oil-producing countries, such as Iran. is symmetrical or static, but the disruption of relations has mentioned changes in the relations. Though the rupture always been perceived to be a high disadvantage and a loss. was the initiative of the government of Iran, it resulted from Raquel Shaoul is a reader and researcher at the Inpex’s continuous delay in the development of the field. East Asian Studies Department of Tel Aviv University Relationship-building: phase analysis (1979-2010) ([email protected]) ‘Phase analysis’ was used to examine the countries’ relations Assertive policy and their interdependency patterns. We determined three At present, and probably for the first time ever in the two phases of the relation-development: Phase One (1979-1989), countries’ relationship, the government of Japan and the Notes Phase Two (1990-2000), and Phase Three (2001-09). The use of various upstream and downstream company policies 1 J. Kroll. 1993. “The Complexity of Interdependence,” this method of analysis has two main purposes: (1) to evaluate vis-à-vis Iran can be portrayed as self-confident and assertive. International Studies Quarterly, 37:3, pp.321-47.